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Power Authority v. Federal Power Commission

December 8, 1964

POWER AUTHORITY OF THE STATE OF NEW YORK, PETITIONER,
v.
FEDERAL POWER COMMISSION, RESPONDENT.



Author: Waterman

Before WATERMAN, MOORE and SMITH, Circuit Judges.

WATERMAN, Circuit Judge.

On July 15, 1953, the Power Authority of the State of New York was issued a license by the Federal Power Commission to construct certain power and navigation works on the St. Lawrence River. Article 27 of the license provided for the payment of annual charges by the Power Authority to the Commission in accordance with Section 10(e) of the Federal Power Act, 16 U.S.C. § 803(e)*fn1 The works having been constructed, the Power Authority was billed for the charges beginning July 17, 1958.

The Power Authority thereupon applied for total exemption from the charges under the proviso to Section 10(e):

"[Licenses] for the development, transmission, or distribution of power by States or municipalities shall be issued and enjoyed without charge to the extent such power is sold to the public without profit or is used by such State or municipality for State or municipal purposes, except that as to projects constructed or to be constructed by States or municipalities primarily designed to provide or improve navigation, licenses therefor shall be issued without charge; * * *."

The Power Authority claimed that the project in which it was engaged was primarily designed to improve navigation, and it also claimed that the power it produced was either used by it for state or municipal purposes or was sold ultimately to the public without profit. The Commission denied the application in large part, but subsequently granted a rehearing. The new proceedings, expanded by stipulation to cover charges imposed through December 31, 1961, commenced in 1962. Following an extensive hearing, the examiner rendered an initial decision in 1963, in essence upholding the prior determination.

On January 13, 1964, the Commission issued a final order, affirming the hearing examiner's decision.51 PUR3d 417. The Commission conceded that the Power Authority is a municipality within the meaning of Section 10(e) of the Federal Power Act. It ruled, however, that the project in which the Power Authority is engaged was not primarily designed to provide or improve navigation, and that the power sold by the Power Authority ultimately for public use was not sold without profit*fn2 The Power Authority, pursuant to Section 313(b) of the Federal Power Act, 16 U.S.C. § 825l(b), petitions for review of these rulings.

Was the project designed primarily to provide or improve navigation?

The history of the St. Lawrence development program furnishes a useful introduction to this question.In 1909 the United States and Great Britain entered into a treaty providing for the use and development of boundary waters between the United States and Canada and creating an International Joint Commission to pass on any projects which would affect the flow or level of the boundary waters. Although numerous proposals to carry out the purposes of the treaty were offered during the next thirty years, no action was taken on them, apparently because of objections to their navigational aspects.

In 1940, a comprehensive report on the development of the St. Lawrence River was filed by a committee composed of engineers from the United States and Canada. The report divided the work to be done into three categories: works solely for navigation, works primarily for power, and works common to navigation and power. An executive agreement between the United States and Canada, providing for implementation of the report, was signed the following year, but it failed of approval by the United States Congress, as was required in the agreement.

Finally, in 1951, the President of the United States and the Prime Minister of Canada reached an understanding designed to break the stalemate. The works designated in the 1940 report as primarily for power and common to power and navigation were to be built by the United States and Canada under the 1909 treaty. The works designated as solely for navigation were to be built by Canada alone, unless the 1941 executive agreement was concurred in by Congress, in which case they would be built jointly by the two countries.

In 1952 the portion of the program to be built under the 1909 treaty was submitted to the International Joint Commission and was approved by that body. The Canadian government had already chosen the Hydro-Electric Power Commission of Ontario to do Canada's share of the work. The following year the Power Authority of the State of New York was selected by the President of the United States to construct the works on the American side of the St. Lawrence. At the same time, the Power Authority applied to the Federal Power Commission and was granted a license in accordance with the plans approved by the International Joint Commission.

In 1954 the United States Congress finally enacted legislation authorizing American participation in construction of the portion of the program designated as solely for navigation. The St. Lawrence Seaway Development Corporation was created to do this country's share of the work. The St. Lawrence Seaway Authority of Canada had already been chosen to make the improvements on the Canadian side of the St. Lawrence. Work began immediately on all phases of the program and by 1959 the entire development was virtually complete and in operation.

Our first task is to define the boundaries of the "project" whose primary purpose is at issue*fn3 The Federal Power Commission ruled that the project consists only of the works licensed to the Power Authority in 1953 and the land on which they are located. The Power Authority contends that it encompasses the complete St. Lawrence development program. In resolving this disagreement, the decision of the United States Court of Appeals for the District of Columbia in Lake Ontario Land Development Ass'n v. FPC, ...


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